Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Politics / Policy/  Finance ministry to set up panel to tackle bad loans in state-run banks
BackBack

Finance ministry to set up panel to tackle bad loans in state-run banks

The panel may be constituted under junior finance minister Jayant Sinha and is expected to adopt sector-specific approaches to deal with bad debts

NPAs in state-run banks have been inching up and are estimated at around 5.6-5.7% of total advances at the end of the second quarter of the current fiscal year. Photo: Pradeep Gaur/MintPremium
NPAs in state-run banks have been inching up and are estimated at around 5.6-5.7% of total advances at the end of the second quarter of the current fiscal year. Photo: Pradeep Gaur/Mint

New Delhi: The government on Friday hinted that the finance ministry may constitute a panel to look into the issue of rising bad debt in state-run banks. The committee may be constituted under junior finance minister Jayant Sinha and is expected to adopt sector-specific approaches to deal with bad debt in the banking sector.

Aluminium, steel and textiles are some sectors that are facing stress and defaulting on loan payments, financial services secretary Anjuly Chib Duggal said. “That was discussed at the meeting of the finance minister with the heads of PSU (public sector unit) banks. It’s too early to get into specifics...it will certainly have a more focused look on certain sectors," she said. “NPA (non-performing assets) is a matter of concern and the government is vigilant in this regard. The government is looking into the problems faced by steel, aluminium and textile sectors."

Duggal was speaking on the sidelines of a payments bank conclave organized by the Centre for Digital Financial Inclusion.

Speaking on the sidelines of this event, Sinha said the government is looking at a multi-dimensional approach to address the issue of bad debt. “NPAs are a result of many factors. There is not one silver bullet that is going to deal with them... It will require us to take a multi-dimensional approach," he said.

The government has moved to rectify the problems faced in the power sector by announcing a bailout package for state electricity boards. To address the steel sector’s problems, the government has imposed customs duty on steel imports to protect the domestic industry. However, the problem of bad debt is yet to abate, with finance minister Arun Jaitley calling the present level of NPAs in state-run banks unacceptable. NPAs in state-run banks have been inching up and are estimated at around 5.6-5.7% of total advances at the end of the second quarter of the current fiscal year.

Bankers, however, are not optimistic. “The finance minister asks us to quickly clean our books. But once we do that, we will have to make more provisioning. Where will the capital come from? The capitalization plan announced is just not enough," said an executive with a Delhi-based bank. He declined to be named.

The government had announced that it will infuse a total of 70,000 crore in state-run banks over three years to adequately capitalize these banks as per international Basel III requirements.

Global rating agency Fitch said in its report dated 26 November, “Infrastructure and steel are considered high risk. They cumulatively account for 20% and 40% of the system’s loans and stressed assets, respectively, and could yield more asset-quality stress if issues—both structural and policy related—are not addressed more urgently."

“The system’s stressed-assets ratio is high, and should only improve marginally in fiscal 2016 but it will take longer for the absolute number of NPLs (non-performing loans) to come down. The stressed assets stock will remain a drag on state banks’ profitability, while resolution will be slow and time-consuming," the report said.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Politics News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 27 Nov 2015, 02:15 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App